More Questions attached 5

Section 1. Multiple Choice Questions

  1. The information provided by financial reporting pertains to

     a. individual business enterprises, rather than to industries or an

        economy as a whole or to members of society as consumers.

     b. business industries, rather than to individual enterprises or an

        economy as a whole or to members of society as consumers.

     c. individual business enterprises, industries, and an economy as a

        whole, rather than to members of society as consumers.

     d. an economy as a whole and to members of society as consumers,

        rather than to individual enterprises or industries.

  2. An effective capital allocation process

     a. promotes productivity.

     b. encourages innovation.

     c. provides an efficient market for buying and selling securities.

     d. all of these.

  3. Companies that are listed on a stock exchange are required to submit

     their financial statements to the

     a. AICPA.

     b. APB.

     c. FASB.

     d. SEC.

 4. Compared to the accrual basis of accounting, the cash basis of

     accounting overstates income by the net increase during the

     accounting period of the

         Accounts         Accrued

        Receivable    Expenses Payable

    ———————  —————————

     a.    No               No

     b.    No               Yes

     c.    Yes              No

     d.    Yes              Yes

5. The following information is available concerning the accounts of

     Franz Company:

     Accounts payable, January 1, 2004                       $18,000

     Cash payments on account during 2004                     75,000

     Purchase discounts taken during 2004

        on 2004 purchases                                      1,200

     Accounts payable, December 31, 2004                      10,000

     Assuming the company records purchases at the gross amounts, the

     total purchases for 2004 would be

     a. $82,200.

     b. $65,800.

     c. $68,200.

     d. $67,000.

                       -------------------------

Sectin 2. Excercises

 6．The Financial Accounting Standards Board was established because

     many groups interested in financial reporting believed that the

     Accounting Principles Board was not effective. Discuss the apparent

     advantages that the FASB should have over its earlier counterpart,

     the APB.

7. State the accounting assumption, principle, information character-

     istic, or constraint that is most applicable in the following cases.

     (1). All payments less than $25 are expensed as incurred.  (Do not use

        conservatism.)                  ________________________________

     (2). The company employs the same inventory valuation method from

        period to period.                ________________________________

     (3). A patent is capitalized and amortized over the periods benefited.

                                      ________________________________

     (4). Assuming that dollars today will buy as much as ten years ago.

                                      ________________________________

     (5). Rent paid in advance is recorded as prepaid rent.

                                         ________________________________

     (6). Financial statements are prepared each year.

                                         ________________________________

     (7). All significant post-balance sheet events are reported.

                                         ________________________________

     (8). Personal transactions of the proprietor are distinguished from

        business transactions.                ________________________________

Section 3. Problems

 8. Yates Company's records provide the following information concerning

     certain account balances and changes in these account balances dur-

     ing the current year.  Transaction information is missing from each

     item below.

     INSTRUCTIONS

     Prepare the ENTRY to record the missing information for each

     account.  (Consider each independently.)

     1. Accounts Receivable:  Jan. 1, balance $41,000, Dec. 31,

        balance $50,000, uncollectible accounts written off during the

        year, $6,000; accounts receivable collected during the year,

        $134,000.  Prepare the entry to record sales.

     2. Allowance for Doubtful Accounts:  Jan. 1, balance $4,000,

        Dec. 31, balance $7,500, uncollectible accounts written off

        during the year, $30,000.  Prepare the entry to record bad debt

        expense.

     3. Accounts Payable:  Jan. 1, balance $25,000, Dec. 31, balance

        $34,000, purchases on account for the year, $110,000.  Prepare

        the entry to record payments on account.

     4. Interest Receivable:  Jan. 1 accrued, $3,000, Dec. 31 accrued,

        $2,100, earned for the year, $20,000.  Prepare the entry to

        record cash interest received.